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  2. 2.  Are the things needed to produce output/ products  Major part of total cost & is one of the most important assets
  3. 3.  Is a system to ensure that material is purchase at the right quality for the right quantity at the right time & price  Needed to:- › Prevent wastage, production delay & obsolescene
  5. 5.  Handling and keeping records of materials in store  Centralized store = HQ buys n handles material  Decentralized store= BRANCH buys n handles material
  6. 6.  Objectives: › Speedy receipts & issue of materials › Labelling material for identification › Maintain correct level of stock › Efficient use of storage space
  7. 7.  To maintain optimum level of stock in hand  To control investment in stock  Method: › ABC analysis › Stock levels › EOQ › Stock recording › Stock taking
  8. 8.  Stocks are analyzed according to their value Category Type of value Control A Highest value Maximum B Medium value Medium C Lowest value minimum
  9. 9.  Control & monitoring can be done by using the formulas: › Re-order level › MAX stock level › MIN stock level › R-order qtty › Ave. stock level › Stock turnover ratio
  10. 10.  Enables an org to control investments in materials  Is used to determine how much material should be order  Minimizes the total cost of stock
  11. 11.  Equation 2DO C  Tabulation › Consists of several order size, where the min total cost is EOQ  Graph O C TC EOQ
  12. 12. EOQ = √ 2DO⁄C D= total demand O = ordering cost C = carrying cost
  13. 13.  At reorder level, stock will be ‘0’ and when replenished the stock will be the maximum level, Q.  At constant demand, average stock is Q/2.  If the total annual demand is D and the order quantity is Q, then the number of orders for stock in a year will be D/Q.  If the cost per order is O, then the total ordering costs will be D/Q xO
  14. 14.  TOTAL COST = (Q/2)C +(D/Q)O
  15. 15. You are required to determine the EOQ based on the following data: Forecasted demand = 2,000 units per month Ordering cost = RM450.00 Unit costs = RM10.00 Carrying cost = RM15% per annum
  16. 16.  Perpetual inventory system › Reflect physical movement of stock & the balance at all times › Is checked against continuos stock taking  Periodic inventory system › Recording are done by doing stock taking at a given time
  17. 17.  To charge to production on a consistent and realistic basis of the cost of materials used and also to provide a satisfactory basis of valuation for inventory on hand
  18. 18.  3 methods to value stock in hand › LIFO › FIFO › WAM
  19. 19.  Materials are used in chronological order  Ensures materials are issued at actual cost  Closing stock valuation is higher
  20. 20.  The latest materials received are used first.  Ensures materials are issued at actual cost  Lower valuation for closing stock
  21. 21.  Average price is used  Price is calculated by dividing the total cost of material in stock by the total quantity of material in stock.  A new price needs to be calculated each time new material are received
  22. 22.  Calculate the value of 30 units of material A closing stock using: a) FIFO method b) LIFO method c) Weighted Average method 1 july opening stock 20 units @rm14 4 july receipts 40 units @rm15 14 july receipts 50 units @rm18 10 july issues 40 units 17 july issues 40 units
  23. 23.  Attempts to overcome EOQ. It affects the way purchasing is carried out.  It requires: › The buyer to identify the suppliers › The buyer enter into a contract with the suppliers to supply materials move frequently › Buyer give a copy of production schedule to supplier › Supplier carries out quality control › Supplier delivers just in time › Materials used in production immediately
  24. 24.  Reducing waste and increasing efficiency of the material usage  Reduce or eliminate inventories at every stage of production
  25. 25.  Key features: › Smooth, uniform production rate › Pull method of production › Purchase in small lot size › Quick inexpensive setups › High quality of materials › Effective preventive maintenance › Teamwork › Multi skilled workers